PRICE T ROWE GROUP INC Q4 FY2024 earnings call

• Rob Sharps highlighted growing ETF business with 17 ETFs and nearly $8B AUM, strong target date franchise with $16.3B net inflows, extension of alternatives business, insurance wins including a partnership with Aspida, substantial gross sales growth, strong client satisfaction, and balance sheet strength with over $1.4B returned to stockholders in 2024.
• Eric Veiel discussed equity and fixed income performance, with 54% of funds beating peer group medians for the year, strong results in some equity strategies like US equity research, and initiatives such as personalized retirement manager, managed lifetime income, integrated equity strategies, private equity capability, and the T. Rowe Price Investment Institute to enhance investment offerings and client experiences.

Adjusted diluted earnings per share for Q4 2024 was $2.12, bringing full-year adjusted diluted EPS to $9.33, up 23% from 2023. Net outflows for Q4 were $19.3 billion, with full-year net outflows at $43.2 billion. The ETF business had $1.4 billion in net inflows during Q4, increasing full-year net inflows to $4.7 billion. The target date franchise had $2.2 billion of net flows in Q4, its strongest since 2019, with full-year inflows of $16.3 billion. Q4 adjusted net revenue was $1.8 billion, increasing full-year adjusted revenue to nearly $7.2 billion, up 10.1% from 2023. Investment advisory revenue for Q4 was $1.7 billion, up 2.5% from prior quarter and 16% from Q4 2023, driven by higher average AUM but offset by a decline in effective fee rate. Full-year investment advisory revenue was $6.4 billion, up 12.1% from prior year.

• Expect 2025 to be better than 2024 with further reduction in net outflows and building momentum. - Adjusted operating expenses excluding carried interest expense expected to be up 4-6% in 2025 compared to 2024's $4.46 billion, including impact of real estate costs from new headquarters. - Continue to prioritize returning capital to stockholders while maintaining a strong financial position.

Q: Bill Katz asked about the venture with Ares and Aspida, including how to think about the insurance opportunity set, potential for ALT into retirement, and M&A for expanding product set.

A: Rob Sharps responded by discussing the partnership with Aspida, the importance of insurance broadly, and the potential for alternatives in defined contribution, noting ongoing work and hurdles but optimism for client outcomes.

Q: Benjamin Budish inquired about fee rate dynamics, specifically exit fee rate in 2025 and January trends.

A: Jen Dardis said fee compression is about 2% in 2025, driven by sales in lower fee strategies and redemptions in higher fee asset classes, with trends expected to offset some pressure over time. Rob Sharps added that fees will continue to come down manageably, with lower fees enhancing value proposition and some strategies targeting lower fee but compelling value.

Q: Glenn Schorr asked about hybrid products across public and private, particularly in fixed income for Aspida.

A: Rob Sharps stated there's potential for convergence of public and private markets, with OHA having demonstrated capability in multi-strategy credit, and ongoing discussions with Aspida on areas where T. Rowe Price has capabilities to add value.

Q: Craig Siegenthaler followed up on 401(k) channels, asking about private equity/credit allocations to retirement products and strategic M&A.

A: Rob Sharps said they aim to offer best-in-class solutions, are open to partnerships or M&A where needed, and Eric Veiel noted liquidity and regulatory issues with private investments in that space.

Q: Dan Fannon inquired about offsetting wins in December and their repeatability.

A: Jen Dardis said the wins were broad-based across asset classes, with ten or eleven wins above $200 million in December. Rob Sharps added they were across strategies, equities, and channels, providing momentum at year-end.

Q: Patrick Davitt asked for more color on the offsetting wins in December.

A: Jen Dardis mentioned the wins were across asset classes, including equities, multi-asset, and fixed income, with broad-based positive flows. Rob Sharps noted they were across strategies and channels, partially offsetting prior redemptions.

Q: Ken Worthington asked about equity outflows and what drives improved equity sales.

A: Eric Veiel said performance is necessary but not sole driver; need to meet clients on vehicle, price, and risk appetite. Rob Sharps added performance is critical, especially over 3-5 years, and areas with strong performance have seen inflows.

Q: Brennan Hawken inquired about expense outlook, real estate costs, and market assumptions.

A: Jen Dardis said market assumptions blend average returns, and real estate costs from new headquarters are estimated at $20-30 million, with impact over time and ongoing real estate portfolio management.

Q: Alexander Blostein asked about medium-term expense management and alignment with organic revenue growth.

A: Rob Sharps said there's opportunity for structural cost savings but need to invest in the business, and Jen Dardis added they're targeting 2-3% annual structural savings to fund new initiatives while balancing investment and cost control.